Crude Starts Session Higher As Israel Decides On Response

Oil had a muted start to the week following Iran’s attack on Israel on the weekend. There is already a geopolitical risk premium priced in and the market now seems prepared to monitor the situation, especially given the pressure on Israel for restraint. Although it said that is has decided on a “forceful” response but in a way that won’t escalate tensions in the region. With Iran promising to retaliate “within seconds”, the risks are still very elevated and oil markets wary.

• WTI ended Monday flat at $85.65/bbl after a low of $84.05. It has started today stronger rising to $85.99, likely in response to Israel’s decision to retaliate to Iran’s attack, but is now at $85.90. The bull theme remains intact with the break above $84.87 opening up $90. Initial resistance is at $87.67 and support at $83.70.
• Brent was also little changed at $90.41/bbl after falling to $88.73 in the US morning. Technicals suggest the benchmark is in consolidation mode but the bull cycle remains in place. Initial resistance is at $92.18 and support at $87.89.
• JP Morgan’s Kaneva said that “the outlook for oil seems to hinge on Israeli response to the attack”. Societe General estimates that direct military engagement between the US and Iran would drive Brent to $140/bbl, which would cause problems for central banks if sustained.